Tag: impact fees

The City of Woodbury, Minnesota is a growing suburb of Saint Paul. To reduce the public burden of road construction to new subdivisions, the city passed an ordinance in 2016 which provides that the city may not approve a proposed subdivision if it is deemed “premature.” The city may deem a subdivision “premature” if streets “to serve the proposed subdivision” are not “available,” which is defined as streets “existing or readily extended and funded” as “consistent with the phasing in the comprehensive plan.”

However the city provides that a new development without existing road infrastructure may be deemed mature if the developer is willing to “pays its own way” and “all associated costs” for “public infrastructure” will “be the sole responsibility of the developing property owner.” To determine these associated costs, the city has allocated undeveloped land into three phases, each of which has an estimated associated cost per acre associated for “increased traffic and trips that are generated” by expected development in that area. This fee is referred to as a “major roadway assessment” or MRA and is used as the starting point for a negotiated agreement with developers.

Martin Harstad, of Harstad Hills Inc., submitted an application to to develop 77 acres of phase – two land into a 183 – home residential community called “Bailey Park on July 23, 2015. The city informed Harstad about certain deficiencies in the application. Harstad remedied the majority of them and was then informed by the city that the remaining deficiencies where relatively unimportant. This is significant because once the city receives a complete application under Minnesota law, if it does not deny that application with cause, it is automatically approved. After receiving the cost estimate from the city for the major roadway assessment, Harstad challenged the ability of the city to collect this fee in court. He also made a takings claim, arguing that the city had deprived him of use of his property without compensation. Finally he claimed that his application had already been approved as the statutory period that the city had to deny the claim had elapsed.

The district court found for the city on the latter two claims. The permit was not entirely complete, therefor the statutory period had never begun. The court also found that Harstads takings claims were immature as the permit had never been fully submitted nor had the fee been collected. The court did however find that the city had no power to collect fees to pay for road infrastructure.

The City of Woodbury appealed this decision to the Minnesota Court of Appeals.

The Minnesota Court of Appeals focused its analysis on the question of the power of Woodbury to collect a “major roadway assessment.” The City of Woodbury is a statutory city; thus, it “has no inherent powers beyond those expressly conferred by statute or implied as necessary in aid of those powers which have been expressly conferred.”

The city argues it has express authority to impose the MRA under the plain language of Minn. Stat. § 462.358, subd. 2a . Section 462.358, subdivision 1a, provides that “a municipality may by ordinance” regulate the subdivision of land to , among other things, facilitate “adequate provision for transportation.” Minn. Stat. § 462.35 8, subd. 1a . Subdivision 2a states , in relevant part:

The standards and requirements in the regulations [authorized by subdivision 1a] may address without limitation : the size, location, grading, and improvement of lots, structures, public areas, streets, [and] roads . . . . The regulations may prohibit the issuance of permits or approvals for any tracts, lots, or parcels for which required subdivision approval has not been obtained.

The regulations may permit the municipality to condition its approval on the construction and installation of sewers, streets , electric, gas, drainage, and water facilities, and similar utilities and improvements or, in lieu thereof, on the receipt by the municipality of a cash deposit.

The city maintains that subdivision 2a’s “open-ended language” unambiguously authorizes it to condition subdivision approval on a developer’s agreement to pay an MRA that funds necessary road improvements “without limitation on location.”

The Court disagrees. This section only authorizes city planning not the collection of a fee to cover road construction costs. The Court pointed out the legislature has explicitly authorized municipalities to assess water and sewer connection charges against developers to fund public water and sewer improvements made necessary by development. The legislature has never made similar provisions for roadways.

The court agreed with the district court finding that although the city had communicated with Harstad that the remaining deficiencies in his application were minimal, the fact that they were never corrected meant that the statutory period in which the city had to approve or deny the application never began.

Finally the court affirmed the district courts denial of Harstad’s taking claim. The permit has not yet been denied nor has the major roadway assessment been collected, so no taking could have occurred.

The City of Woodbury has appealed to the Minnesota Supreme Court which accepted to hear the case. A date for oral argument has not been set.

In the last twenty years, Hamilton Township in Ohio has experienced significant growth in its population and development. In response to the growth, the Township adopted a resolution that required potential developers to pay impact fees in order to apply for and acquire a zoning certificate to develop in an unincorporated area. The stated purpose of the impact fee was “to benefit the property by providing the Township with adequate funds to provide the same level of service to that property that the Township currently affords previously developed properties.”

The fee included four categories: a road-impact fee, a fire-protection impact fee, a police-protection-impact fee, and a park-impact fee. The amount assessed to each property was determined by its use. Properties to be used for single-family dwellings were assessed a total of $6,153 while those being developed for retail/commercial purposes were assessed a $7,962. The money received was placed into separate accounts (one for each category) not put into the general fund. The funds in each account may be used only for the purpose of each account.

Drees Company, among others, alleged that the impact fees are contrary to Ohio law and are unconstitutional. Hamilton Township is a limited-home-rule township that may “exercise all powers of local self-government within the unincorporated area of the township…and shall enact no other taxes other than those authorized by general law.” Drees Company argued that the impact fee is really a tax and, therefore, the Township was not authorized to enact the resolution. The trial court ruled in favor of the Township. It stated that Hamilton Township “may make and fund improvements to benefit new development by use of its system of impact fees, because the resolution is not in conflict with any other Ohio statute, and because it is sufficiently narrowly tailored to provide services to the class of fee payers in exchange for the fees.” The Court of Appeals affirmed, noting that the impact fee did not constitute a prohibited form of taxation. Drees further appealed the case.

In this case, the Supreme Court of Ohio had to distinguish a fee from a tax. It looked to precedent in its analysis to note how the two have been historically contrasted. In State ex rel. Petroleum Underground Storage Tank Release comp. Bd. V. Withrow, the Court looked to “the substance of the assessments and not merely their form.” It had to determine whether assessments imposed on owners and operators of underground storage tanks (“USTs”) were taxes. The stated purpose of the fees was “to reimburse owners and operators of USTs for the costs of corrective actions in the event of a release of petroleum into the environment and to compensate third parties for bodily injury and/or property damage resulting from such occurrences.”

In Withrow, the Court determined the assessments to be fees for four reasons: (1) the fees were imposed to further regulatory measures to address environmental problems caused by leaking USTs; (2) the funds were never placed in general funds and were to be used strictly for problems related to USTs; (3) the fee was in exchange for protection from UST leaks; and (4) if the fund exceeded a certain amount, no assessment would be charged that year. The Court noted that, when applying the factors from Withrow to this case, the impact fees seem to constitute taxes. The fees lack any sort of regulatory function, can be spent on typical township expenses, are not in exchange for any particular service, and are not responsive to need.

The Court next looked to Am. Landfill, Inc. v. Stark/Tuscarawas/Wayne Joint Solid Waste Mgt. Dist., where the Sixth Circuit Court of Appeals was faced with a similar situation. It had to determine wither assessments imposed by Ohio solid-waste-management districts on people disposing of waste were fees or taxes. The fees were to be used for various things pertaining to the county’s waste management plan. The court employed a three-factor analysis that considered (1) the entity that imposes the assessment; (2) the parties upon whom the assessment is imposed; and (3) whether the assessment is expended for general public purposes, or sued for the regulation or benefit of the parties upon whom the assessment is imposed.

The Court noted that an assessment imposed by a legislature is more likely to be a tax than one imposed by an administrative agency. Furthermore, an assessment imposed upon a broad class of parties is more likely to be a tax than one imposed on a narrow class. The third factor, the use of the assessment, is the predominant factor. Applying the Am. Landfill test to this case points to the fact that the impact assessments constitute taxes. They were imposed by a legislative body, not an administrative one. They were also imposed on a fairly large group of people. Furthermore, the funds were to be used for public benefit, not solely for the benefit of those property owners.

The Court noted that an essential question was whether the assessments were for public or private benefit. It noted that the goal of the assessment was “for the township to have the necessary funds to allow all properties in the township to maintain their same level of service despite recent, rapid growth.” The resolution itself stated it was for “the protection of the health, safety, and general welfare of the citizens and property owners of the Township.” Consequently, the Court concluded that the assessments constituted a tax and were therefore not authorized. It reversed the decision and remanded it to trial court.